Monday, 28 November 2011

Libya: Sovereign wealth to finance infrastructure

Libyan Investment Authority (LIA) funds will be used to finance reconstruction inside the country rather than invested abroad. The sovereign wealth fund's acting chief executive, 46-year-old Rafik Nayed, recently told international wire services that he expected the $65 billion fund to contract in the short term because of this decision.

Since August, Nayed has led a team that is reviewing all LIA investments and has put a moratorium on operations until this is complete. 'We aren't interested in new deals,' he told the Wall Street Journal back in September. 'My mandate … is to untangle the inheritance of the regime and stabilise.'

When it was established, the LIA said that it aimed to be transparent and to follow the best international investment practices. This was partly to allay suspicion about the motives that a powerful Qadhafi-controlled fund might have for acquiring assets in Europe and the United States.

These resolutions were not kept. By 2010, several original members of the board of trustees had resigned. Documents leaked to activist organisation Global Witness in June 2011 showed that many large investments made by the fund had in fact lost money. Nayed has attempted to introduce greater openness, telling Reuters that cash, equities, and fixed income products accounted for about 77 per cent of the total assets under management. He identified potential problems in many of the asset classes, describing the equities holdings as insufficiently diversified and some of the strategic shareholdings, managed partly through the Libyan African Investment Portfolio,as loss making.

He also said that he planned to examine the alternative and hedge fund investments closely, including deals with Goldman Sachs and Société Générale.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

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